KeNo's Housing and Economic Portal: Sunday April 11 Housing and Economic stories

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TOP STORIES:

Social Security to See Payout Exceed Pay-In This Year - (www.nytimes.com) The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security. This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office. Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual. The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax. Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances.

Sales of New U.S. Homes Dropped to Lowest on Record - (www.bloomberg.com) Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market. Purchases decreased 2.2 percent to an annual pace of 308,000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years. New-home sales are vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6 percent this year, close to a 26-year high. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the market as the administration takes steps to overhaul real-estate financing and regulation. “Americans remain downbeat on the housing market,” said David Semmens, an economist at Standard Chartered Bank in New York, who forecast a 300,000 sales pace. “We expect the continuation of poor sales to lead to a resumption of downward price pressure.”

Fannie and Freddie Resist Loans for Energy Efficiency - (online.wsj.com) The government's mortgage-finance agencies Fannie Mae and Freddie Mac are resisting a White House-backed effort to make it easier for homeowners to get loans to make their houses more energy efficient. The problem: deciding who gets paid first if the borrower defaults. Under the program, homeowners would borrow money from their local government to pay for energy improvements—from high-efficiency furnaces that cost a few thousand dollars, to solar-panel systems that can cost more than $30,000. They would then repay the loan over 15 to 20 years through a special assessment added to their property-tax bills. Local governments would get the funding by selling municipal bonds to investors. This debt would be senior to existing mortgage debt, so if the homeowner defaults or goes into foreclosure, it would be repaid before the mortgage lender gets any money. While property-tax assessments are usually senior to existing property debt, cities have traditionally used their assessment authority for community-wide improvements like sewers and roads—not for upgrades that homeowners elect to make on their own homes.

Ambac Subprime Contracts Taken By Wisconsin Insurance Regulator - (www.bloomberg.com) Ambac Financial Group Inc. will hand control of subprime mortgage-related contracts to a regulator amid concern the second-largest bond insurer’s collapse would trigger losses for municipal note-holders. Ambac Assurance Corp., which guarantees $696 billion of debt payments, will set up a segregated account for insurance contracts linked to credit-default swaps, residential mortgage- backed securities and other structured finance transactions, the parent company said in a statement. The Wisconsin Office of the Commissioner of Insurance ordered the handover to “protect policyholders, including investors in thousands of state and local municipal bond issues,” according to a separate statement. “While there’s clearly significant uncertainty, the potential outcome of these actions for Ambac Assurance is positive in that it may emerge stronger and without the threat of rehabilitation hanging over it,” said Michael Cox, a structured-finance strategist at Chalkhill Partners LLP in London.

Citi's Yard Sale Crimps a Turnaround - (online.wsj.com) It is probably the biggest garage sale ever: credit cards, mortgages, brokerage operations, a door-to-door insurance business, even a ski lodge that Citigroup Inc. amassed as it tried to build a financial supermarket to the world. Now that the dream is gone, the New York company is working hard to get rid of assets it no longer wants, still haunting Citigroup more than two years after the financial crisis hit. Fourteen months into the sales process, though, it is clear executives are in for a long, hard slog. Citigroup, the third-largest U.S. bank-holding company by assets behind Bank of America Corp. and J.P. Morgan Chase & Co., has shed just one-fourth of the roughly $715 billion in assets it moved into a unit called Citi Holdings in January 2009. Citigroup's overall asset size as of Dec. 31 was down 4.2% from a year earlier, to $1.86 trillion, compared with J.P. Morgan Chase's 6.6% decline. The slow-moving merchandise is making it harder for Citigroup Chief Executive Vikram Pandit to turn around the company's bottom line, frustrating some investors. Analysts expect core businesses to churn out an impressive $16 billion in profits this year, but credit losses on the garage-sale assets likely will hit $13 billion.

SEC Enforcer Probes ‘Egregious Conduct’ as Muni Scrutiny Widens - (www.bloomberg.com) Elaine Greenberg, whose crackdown on regulatory abuses in the $2.8 trillion U.S. municipal bond market is the most ambitious since the 1990s, knows a public- debt scandal when she sees one. In more than 20 years at the Securities and Exchange Commission, Greenberg, 49, sued officials of Pennsylvania’s biggest non-profit hospital system for fraud and stripped the securities license from an underwriter who sold risky debt to school districts. Now she’ll direct the SEC’s attention to states and cities as part of a focus on the tax-exempt market by Chairman Mary Schapiro, 54. In her sights are possible bid-rigging for municipal-investment contracts by banks including JPMorgan Chase & Co. and Bank of America Corp., public officials who hire advisers based on political contributions and local governments that fail to disclose their true financial condition. “There’s some very egregious conduct that goes on,” Greenberg said in an interview at the SEC’s Philadelphia office, where she’s an associate director. “The deterrent effect of cases the SEC brings in this area has the potential to be high.”

OTHER STORIES:

Stocks Rally, Dubai Swaps Plunge as Officials Ease Debt Concern - (www.bloomberg.com)

Momentum Builds on Bid To Revamp Finance Rules - (online.wsj.com)

China comments add to sovereign debt fears - (www.ft.com)

SEC probing two hedge funds: report - (www.reuters.com)

Merkel Sets Greek Aid Terms, Sees IMF-EU Tandem as Last Resort - (www.bloomberg.com)

Germany Asserts Clout to Impose Greek Aid Conditions - (www.bloomberg.com)

Dubai Offers Dubai World $9.5 Billion in New Funds - (www.bloomberg.com)

ECB Offers Olive Branch to Greece - (online.wsj.com)

Rising imports best 'cure' for China trade gap, PBOC official - (www.marketwatch.com)

Trichet Says ECB to Keep Collateral Rules Beyond 2010 - (www.bloomberg.com)

China sees interest rates as "heavy-duty weapon" - (www.reuters.com)